20VC: Did Figma Kill M&A Markets in 2024, The Three Biggest Mistakes Made in Growth Investing, The Three Requirements Companies Need to Go Public in 2024 with Ed Sim and Jamin Ball
Jan 10, 2024
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Jamin Ball and Ed Sim discuss the mistakes made in growth investing, the impact of Figma on M&A markets, and the requirements for companies to go public in 2024. They also touch upon data strategy, AI security, venture capital misconceptions, and express gratitude for each other's participation.
Large-scale M&A deals are currently challenging due to the regulatory environment and antitrust concerns.
Companies are more likely to engage in smaller-scale acquisitions focused on strategic additions or aquihires.
Private-to-private acquisitions can help companies strengthen their platform capabilities and expand their market presence.
Deep dives
M&A activity facing regulatory challenges
From a regulatory standpoint, it is currently difficult to see any large-scale M&A happening. The regulatory environment and the administration make it challenging for companies to pursue significant M&A deals. This leads to a cautious approach towards M&A, as regulations and antitrust concerns create uncertainties and potential roadblocks.
A focus on strategic acquisitions and aquihires
Companies are hesitant to engage in larger M&A transactions due to the regulatory environment and associated challenges. Instead, we can expect to see smaller-scale acquisitions that are focused on strategic additions or aquihires. Companies will likely be looking for talent or specific products that can enhance their existing offerings.
The importance of private-to-private acquisitions
Private-to-private acquisitions may become more prevalent as companies seek to strengthen their product offerings and platform capabilities. Acquiring complementary products or technologies can help companies build a more robust platform and increase their chances of going public. Private-to-private acquisitions offer companies an opportunity to add value and expand their market presence.
Exit challenges and the need for early conversations
The current landscape poses challenges for companies looking to achieve significant exits. Boards and founders are now considering whether it is worth embarking on the potentially distracting process of pursuing an acquisition, given the uncertainties and complexities. Early and open conversations about future exit strategies and evaluating long-term growth potential can help companies make informed decisions about their future direction.
The Importance of Going Public
Going public is seen as a way for companies to reset their business, convert preferred shares to common shares, and start innovating in the public markets. It may involve accepting a down round IPO, but it allows for liquidity and growth opportunities.
The Future of Software Spending and AI
While software spending may have slowed down, there is optimism regarding the potential of new technology shifts, particularly in AI. Companies need to focus on having a strong data strategy and solving real problems in order to succeed. Additionally, there are new markets and innovations emerging, such as AI security and data platforms, that hold potential for growth and value creation.
Jamin Ball is a Partner @ Altimeter Capital where he sits on the board of Airbyte, Clickhouse, dbt Labs, Prisma, Tabular. Jamin has also led investments in Deel, MotherDuck, Personio and Starburst. Prior to Altimeter, Jamin spent 5 years at Redpoint where he led investments in Workato, Monte Carlo, Cityblock Health, Root Insurance.
Ed Sim is one of the best seed round investors in venture as the Founder and Managing Partner @ Boldstart, Ed focuses specifically on developer, infra and SaaS at pre-seed and seed round. Over the last decade, Ed has backed some of the best including Snyk, BigID, Kustomer, Front and Superhuman.
In Today's Episode We Discuss:
1. How to Invest Successfully in 2024:
What are the three biggest mistakes growth investors can make in 2024?
Why should founders not start a platform company?
What were Jamin and Ed's biggest mistakes from the ZIRP era?
How does Jamin justify paying an $8BN price for Hopin? What were his lessons?
2. The M&A Markets in 2024:
Did Figma kill the M&A markets for 2024? What should we expect in M&A?
Why will private companies buying private companies be a massive segment in 2024?
What are Ed and Jamin's biggest tips to founders considering selling their company in 2024?
3. When Will IPOs Come Back:
What will be the catalyst to the opening of the IPO markets?
Will Stripe and Databricks go public in 2024? What others should we expect?
What are the three requirements for a company to go public in 2024?
4. Firesales: Investors Need Cashback:
Why does Ed believe now is the time in the cycle where late-stage investors want cash back to distribute back to their LPs or to recycle?
What should we expect to see in terms of acqui-hires and firesales?
What are the different incentives when comparing founders vs early stage VCs vs late stage VCs when it comes to acquisitions?
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